Construction continues on the new Ralph L. Carr Colorado Judicial Complex in downtown Denver in this photo, taken in July. Senate Bill 1 would award 3 percent “local” preferences to companies bidding for state government construction and service contracts.

We understand the impetus behind Democrats’ efforts to pass legislation granting preferences of up to 5 percent on state contracts to Colorado companies.

In the current economy, any boost to local businesses seems like a good idea.

But in trying to prop up Colorado companies, Senate Bill 1 instead sends the wrong signal about our state’s business climate.

In a competitive global marketplace, we should be doing more to expand opportunities for companies — regardless of where the majority of their employees are located — to do business in the state and for Colorado companies to do business elsewhere.

This bill, which would award preferences to contractors for state work who certify that at least 90 percent of workers live in Colorado, has the potential to harm both efforts.

We urge lawmakers to reject it.

SB 1 is similar to a measure last year that would have given Colorado bidders on state construction projects preference should their bid come within 5 percent of the lowest bid from a non-resident firm.

Had it been in place, last year’s bill would have increased the state’s construction costs in 2010 by close to $7 million as a result of higher bids going to Colorado firms, according to a legislative analysis.

This year’s SB 1 would award 3 percent “local” preferences — meaning their bids would be lowered by that amount — to companies bidding for state government construction and service contracts. That figure could increase to 5 percent if companies provide health insurance and retirement benefits and allow employees to participate in certain training programs.

The fiscal note did not examine how much it would cost the state were it in effect. But it does point out that the measure would add as much as $50,000 for every $1 million spent.

Lawmakers have bridged budgetary shortfalls of well over $1 billion in recent years, and their first priority should be to make sure they spend money as prudently as possible. In other words, the lowest bidder should get the job.

Proponents of the bill note that other states have similar measures in place, which makes for an uneven playing field for Colorado-based companies. But Colorado law currently penalizes companies from those states that have preference.

Passing the measure, we believe, could have unintended consequences, as states where resident preference isn’t given could decide to penalize Colorado companies in their bidding processes.

Other problems include impacts on firms located near state borders (Durango and Fort Collins come to mind); the potential loss of federal highway funds (though an amendment is intended to address that); and additional costs placed on small businesses and the state, among others.

Lawmakers should support a business climate where businesses compete first based on the low bid, not location.

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